nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒01‒29
sixteen papers chosen by

  1. Impact of CAP Pillar II Payments on Agricultural Productivity By Hasan DUDU; Zuzana Smeets Kristkova
  2. The mystery of TFP By Oulton, Nicholas
  3. Gender Gap in Entrepreneurship and Firm Performance in Developing Countries By Inmaculada Martínez-Zarzoso
  4. Tracking the slowdown in long-run GDP growth By Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
  5. From central planning toward a market economy: The role of ownership and competition in Vietnamese firms’ productivity By Fabio Pieri; Le Manh-Duc; Enrico Zaninotto
  6. Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design By Giuseppina Gianfreda; Giovanna Vallanti
  7. How Bad Is a Bad Loan? Distinguishing Inherent Credit Risk from Inefficient Lending (Does the Capital Market Price This Difference?) By Joseph Hughes; Choon-Geol Moon
  8. Vintage effects in human capital: Europe versus the United States By Inklaar, Robert; Papakonstantinou, Maria Anna
  9. The Completion Shift of German Universities of Applied Sciences By Gralka, Sabine; Wohlrabe, Klaus; Bornmann, Lutz
  10. Does Unemployment Insurance Affect Productivity? By Michal Soltes
  11. Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy By Eva Lyubich; Joseph S. Shapiro; Reed Walker
  12. Introducing medium-and long-term productivity responses in Aglink-Cosimo By Wyatt Thompson; Joe Dewbre; Patrick Westfhoff; Kateryna Schroeder; Simone Pieralli; Ignacio Perez Dominguez
  13. Update : Normalized CES Production Function for Turkey By Selen Andic
  14. Investment in knowledge-based capital and its impact on productivity By Siedschlag, Iulia; Lawless, Martina; Di Ubaldo, Mattia
  15. Is Scientific Performance a Function of Funds? By Alona Zharova; Wolfgang K. Härdle; Stefan Lessmann
  16. EXPORT AND PRODUCTIVITY IN GLOBAL VALUE CHAINS: COMPARATIVE EVIDENCE FROM LATVIA AND ESTONIA By Konstantins Benkovskis; Jaan Masso; Oleg Tkacevs; Priit Vahter; Naomitsu Yashiro

  1. By: Hasan DUDU (European Commission - JRC); Zuzana Smeets Kristkova
    Abstract: The impact of agricultural subsidies on productivity has long been discussed in the literature without any clear conclusions. Many studies attempted to shed light on the topic by using various methods and data (mostly relying on geographically limited farm-level data). Depending on the model specification, statistical method and data source mixed results are reported. This study aims at estimating the impact of common agricultural policy Pillar II payments on agricultural productivity by using NUTS-2 level data for the years 2007-2013 for the EU member state countries. We use a rather novel approach by simultaneously estimating a CES production function with productivity coefficients linked to the Pillar II payments. We use 4 categories of Pillar II payments (i.e. human capital, physical capital, agro-environmental and rural development) to explain the total factor productivity in agricultural sector. Our results suggest that regions receiving higher Pillar II payments for physical capital investments, human capital development or agro-environmental measures increase productivity. On the other hand, payments related to rural development do not have significant impact on productivity. The results do not change among the member states, date of access to the EU (i.e. old or new member states), spatial characteristics (i.e. being in the south, north or east) or size of the countries (i.e. big or small economies).
    Keywords: productivity, agricultural subsidies, CAP policies
    Date: 2017–07
  2. By: Oulton, Nicholas
    Abstract: I analyse TFP growth at the sectoral and aggregate level, using data for 10 industry groups covering the market sector for 18 countries over the period 1970-2007 drawn from the EU KLEMS dataset. TFP growth displays persistence at the aggregate level but not at the industry level, suggesting industry outputs are measured with error. In all countries resources have been shifting away from industries with high TFP growth towards industries with low TFP growth. Nevertheless I find that structural change (as measured by changes in value added shares) has favoured growth in most countries. Errors in measuring capital or in measuring the elasticity of output with respect to capital are unlikely to substantially reduce the role of TFP in explaining growth. The pattern of growth in these 18 countries is more consistent with an underlying two-sector model than with the one-sector (Solow) model. Standard theory suggests that TFP growth induces capital accumulation, at least in the long run. This is not the case with the raw EU KLEMS data used here. But standard theory finds some support when the data are smoothed to remove cyclical effects.
    JEL: J1
    Date: 2016–01
  3. By: Inmaculada Martínez-Zarzoso (Dept of Economics and Center for Statistics, Georg-August Universitaet Goettingen, Göttingen, Germany & Dept of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: This paper uses firm-level data from the World Bank Enterprise Surveys (WBES) to investigate productivity gaps between female and male-managed companies in developing countries. We depart from the previous literature by using the gender of the top manager as target variable, which is newly available in the 2016 version of the WBES. The main results indicate that it is crucial to distinguish between female management and female ownership and also the confluence between both. We find that when the firms are managed by females and there are not female owners, they show a higher average labour productivity and total factor productivity. However, if females are among the owners and a female is the top manager, then their productivity is lower than for other firms. These results are very heterogeneous among regions. In particular, results in South Saharan Africa, East Asia and South Asia seems to be driving the general results
    Keywords: firm performance, gender gap, developing countries, top manager, TFP
    JEL: J16 O15 O44
    Date: 2017
  4. By: Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
    Abstract: Using a dynamic factor model that allows for changes in both the longrun growth rate of output and the volatility of business cycles, we document a significant decline in long-run output growth in the United States. Our evidence supports the view that most of this slowdown occurred prior to the Great Recession. We show how to use the model to decompose changes in long-run growth into its underlying drivers. At low frequencies, a decline in the growth rate of labor productivity appears to be behind the recent slowdown in GDP growth for both the US and other advanced economies. When applied to realtime data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.
    Keywords: Long-run growth; Business cycles; Productivity; Dynamic factor models; Real-time data
    JEL: C32 E23 E32 O47
    Date: 2016–01–25
  5. By: Fabio Pieri; Le Manh-Duc; Enrico Zaninotto
    Abstract: This paper examines the role of ownership and market competition in Vietnamese firms’ total factor productivity (TFP) from 2001 to 2011. Making use of a large panel dataset of Vietnamese manufacturing firms, we find that, on average, both foreign-owned enterprises(FOEs) and state-owned enterprises (SOEs) have performed better than privately owned enterprises (POEs) in terms of their TFP levels. However, while FOEs ranked the highest in terms of TFP in the period 2001-2006, SOEs "closed the gap" with FOEs in the period 2007–2011. SOEs’ good performance may be the result of the state-led development policies undertaken during the 2000s. We also find that market competition has been effective in enhancing average firm productivity and reducing the gaps in efficiency across firms of different ownership types. Based on these results, we compare Vietnam’s transition path with those followed by other countries.
    Keywords: Ownership, market competition, TFP, Vietnamese manufacturing, transition economies
    JEL: D24 L33 O53 N60 P27
    Date: 2018
  6. By: Giuseppina Gianfreda (Università della Tuscia); Giovanna Vallanti (Luiss "Guido Carli")
    Abstract: Compliance with labour law has costs and benefits which may depend on the institutional environment in which firms operate. Although several studies have documented a negative effect of informality on firms' productivity and growth, it is a fact that firms may resort to undeclared employment to escape excessive tax or regulatory burden. We argue that firms may respond to strict employment protection legislation through accrued informality thus (partially) offsetting the negative effect of informality on productivity. We exploit the Italian dismissal legislation imposing higher firing costs for firms with more than 15 workers and show that informality reduces the turnover of formal jobs for firms above the 15 workers threshold; furthermore, while the overall effect of informality on firms' productivity is negative, the differential effect for firms above the threshold as compared to smaller firms is positive and significant.
    Keywords: tax evasion, EPL, productivity, firm size, RD estimation.
    JEL: D02 D22 D24
    Date: 2017
  7. By: Joseph Hughes (Rutgers University); Choon-Geol Moon (Hanyang University)
    Abstract: We develop a novel technique to decompose banks’ ratio of nonperforming loans to total loans into three components: first, a minimum ratio that represents best-practice lending given the volume and composition of a bank’s loans, the average contractual interest rate charged on these loans, and market conditions such as the average GDP growth rate and market concentration; second, a ratio, the difference between the bank’s observed ratio of nonperforming loans, adjusted for statistical noise, and the best-practice minimum ratio, that represents the bank’s proficiency at loan making; third, a statistical noise. The best-practice ratio of nonperforming loans, the ratio a bank would experience if it were fully efficient at credit-risk evaluation and loan monitoring, represents the inherent credit risk of the loan portfolio and is estimated by a stochastic frontier technique. We apply the technique to 2013 data on top-tier U.S. bank holding companies which we divide into five size groups. The largest banks with consolidated assets exceeding $250 billion experience the highest ratio of nonperformance among the five groups. Moreover, the inherent credit risk of their lending is the highest among the five groups. On the other hand, their inefficiency at lending is one of the lowest among the five. Thus, the high ratio of nonperformance of the largest financial institutions appears to result from lending to riskier borrowers, not inefficiency at lending. Small community banks under $1 billion also exhibit higher inherent credit risk than all other size groups except the largest banks. In contrast, their loan-making inefficiency is highest among the five size groups. Restricting the sample to publicly traded bank holding companies and gauging financial performance by market value, we find the ratio of nonperforming loans to total loans is on average negatively related to financial performance except at the largest banks. When nonperformance, adjusted for statistical noise, is decomposed into inherent credit risk and lending inefficiency, taking more inherent credit risk enhances market value at many more large banks while lending inefficiency is negatively related to market value at all banks. Market discipline appears to reward riskier lending at large banks and discourage lending inefficiency at all banks.
    Keywords: commercial banking, credit risk, nonperforming loans, lending efficiency
    JEL: G21 L25 C58
    Date: 2018–01–16
  8. By: Inklaar, Robert; Papakonstantinou, Maria Anna (Groningen University)
    Abstract: The standard assumption in growth accounting is that an hour worked by a worker of given type delivers a constant quantity of labor services over time. This assumption may be violated due to vintage effects, which were shown to be important in the United States since the early 1980s, leading to an underestimation of the growth of labor input (Bowlus and Robinson, 2012). We apply their method for identifying vintage effects to a comparison between the United States and six European countries. We find that vintage effects led to increases of labor services per hour worked by high-skilled workers in the United States and United Kingdom and decreases in Continental European countries between 1995 and 2005. Rather than productivity growth advantage of the US and UK, the primary difference with Continental European countries was human capital vintage effects instead.
    Date: 2017
  9. By: Gralka, Sabine; Wohlrabe, Klaus; Bornmann, Lutz
    Abstract: In research on higher education, the evaluation of completion and drop-out rates has generated a steady stream of interest for decades. While most studies only calculate quotes using student and graduate numbers for both phenomena, we propose to also consider the budget available to universities. We transfer the idea of the excellence shift from the research (Bornmann et al., 2017) to the teaching area, and particularly to the completion rate of educational entities. The completion shift shows institutions’ ability to produce graduates as measured against their basic academic teaching efficiency, thereby avoiding the well-known heterogeneity problem in efficiency measurement. Their politically determined focus on education makes German universities of applied science the perfect sample for evaluating this novel method. Using a comprehensive dataset covering the years 2008 to 2013, we show that the shift produces results, which correlate considerably with the results of the standard Data Envelopment Approach (DEA). Thus, we recommend the completion shift as an alternative method of efficiency measurement in the teaching area. Compared to DEA, the computation of the shift is easy and the results are understandable to non-economists.
    Keywords: Efficiency, Completion Shift, DEA, Students, Universities of Applied Sciences
    JEL: A23 D61 H52 I21 I23
    Date: 2017–11–19
  10. By: Michal Soltes (CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences, Politickych veznu 7, 111 21 Prague, Czech Republic)
    Abstract: This study provides evidence that more generous unemployment insurance system is associated with faster growth of productivity. The results are consistent with the theory that higher social insurance allows workers to search for more suited jobs and as a result, the worker-job match is more productive (e.g. Acemoglu and Shimer (1999)). This study also discusses reasons why the observed relationship is unlikely to be explained by the fact that richer countries provide more generous unemployment insurance. Our results extend the previous literature on generosity of unemployment insurance and quality of post-unemployment worker-job match by studying the effect on aggregate productivity.
    Keywords: Unemployment Insurance, TFP Growth, Generosity of Unemployment Insurance, Productivity
    JEL: J65 O43
    Date: 2017–09
  11. By: Eva Lyubich (UC Berkeley); Joseph S. Shapiro (Cowles Foundation, Yale University); Reed Walker (University of California, Berkeley, IZA, & NBER)
    Abstract: This paper provides the first estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three findings emerge. First, within narrowly de ned industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments.
    JEL: F18 H23 Q56
    Date: 2018–01
  12. By: Wyatt Thompson; Joe Dewbre; Patrick Westfhoff; Kateryna Schroeder; Simone Pieralli (European Commission - JRC); Ignacio Perez Dominguez (European Commission - JRC)
    Abstract: This report aims at enhancing the Aglink-Cosimo model by incorporating agricultural productivity growth. It contains a first attempt to develop a measure of the productivity response of agricultural commodities represented in Aglink-Cosimo. In the report we first present how productivity growth is considered at present in the model. Subsequently, we review the literature on how technical progress and price elasticities of yield relate to yield growth. From the literature, we extract a way of capturing endogenously productivity growth. We document the Aglink-Cosimo model changes and focus on some specific cases. Finally, we prepare a scenario analysis on the actual baseline and on an economy with a higher GDP growth rate. The scenario, applied to both cases, studies the effect of a 20% labour price increase on endogenous productivity growth.
    Keywords: endogenous productivity growth, Aglink-Cosimo, agriculture, trade, world markets
    Date: 2017–04
  13. By: Selen Andic
    Abstract: [EN] This study re-estimates the normalized CES production function for Turkey with the revised GDP data. It employs a supply-side system of equations, which incorporates the production function and two first-order conditions. Results indicate that the elasticity of substitution is 0.6 and still significantly below 1. Labor has a positive but slowing productivity growth while capital has a falling productivity. Labor-augmenting technical progress is dominant in the long run as the total factor productivity growth is positive. The revised data implies a higher potential growth for Turkey compared to the old data. Strong capital accumulation and improvement in the productivity seem to be the reasons for the change in potential growth. [TR] Bu calisma, normalize edilmis sabit ikame esneklikli uretim fonksiyonunu Turkiye’nin revize edilmis milli gelir verileriyle tekrar tahmin etmeyi amaclamaktadir. Bunu yaparken, uretim fonksiyonu ve iki adet birinci derece kosullarindan olusan arz yonlu bir denklem sistemi kullanilmistir. Sonuclar, ikame esnekliginin 0,6 ile 1’in hala anlamli bir sekilde altinda oldugunu gostermektedir. Isgucu verimliligi yavaslayarak artmakta, sermaye verimliligi ise azalmaktadir. Uzun vadede isgucu verimliliginin sermaye verimliligine kiyasla baskin oldugu bulunmakta, bu durum ekonomi genelindeki verimlilik buyumesinin pozitif olmasinda kendini gostermektedir. Revize edilmis veri, eski veriye kiyasla, Turkiye’de potansiyel buyumenin arttýgini ortaya koymaktadir. Bu artisin sebebi, guclu sermaye birikimi ve verimlilikteki iyilesme olarak gozukmektedir.
    Date: 2017
  14. By: Siedschlag, Iulia; Lawless, Martina; Di Ubaldo, Mattia
    Date: 2017
  15. By: Alona Zharova; Wolfgang K. Härdle; Stefan Lessmann
    Abstract: The management of universities demands data on teaching and research performance. While teaching parameters can be measured via student performance and teacher evaluation programs, the connection of research outputs and their grant antecedents is much harder to check, test and understand. This paper elicits the interdependence structure between third-party expenses (TPE), publications, citations and academic age. To describe the relationship, we analyze individual level data from a sample of professorships from a leading research university and a Scopus database for the period 2001 to 2015. Using estimates from a PVARX model, impulse response functions and a forecast error variance decomposition, we show that analyzing on the high aggregation level of universities does not reflect the behavior of its faculties. We explain the differences in relationship structure between indicators for social sciences and humanities, life sciences and mathematical and natural sciences. For instance, for mathematics and some fields of social sciences and humanities the relationship between the TPE and the number of publications is insignificant, however, the influence of the TPE on the number of citation is significant and positive that indicates the difference between quality and quantity of research outputs. The paper also proposes a visualization of the cooperation between faculties and research interdisciplinarity via the co-authorship structure among publications. We discuss the implications for policy and decision making and suggest recommendations for research management of universities.
    Keywords: research performance; decision making; third-party funds; publications; citations; PVARX model
    JEL: M10 C32
    Date: 2017–08
  16. By: Konstantins Benkovskis; Jaan Masso; Oleg Tkacevs; Priit Vahter; Naomitsu Yashiro
    Abstract: This paper investigates the effect of export entry on productivity, employment and wages of Latvian and Estonian firms in the context of global value chain (GVC). Like in many countries, exporting firms in Latvia and Estonia are more productive, larger, pay higher wages and are more capital intensive than non-exporting firms. While this is partly because firms that are originally more productive and have better performances are more likely to enter export, Latvian and Estonian firms also realise more than 23% and 14% higher labour productivity level as the result of export entry. Export entry also increases employment and average wages. Gains in productivity and employment are particularly large when firms enter exports that are related to participation in knowledge-intensive activities found in the upstream of GVC. For instance, Latvian firms that start exporting intermediate goods or non-transport services (which include knowledge intensive services) enjoy significantly higher productivity gains than those starting to export final goods or transport services. These findings underscore the importance of innovation policies that strengthen firms’ capabilities to supply highly differentiated knowledge-intensive goods and services to GVC.
    Keywords: productivity, global value chain, export, Latvia, Estonia
    JEL: F12 F14 O19 O57
    Date: 2018

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